Auto Insurance for Leased Cars
You’ll need to contact your leasing company for their insurance requirements and purchase a policy that meets or exceeds the required coverage.
Written by Maxine Boyko
Reviewed by Kathleen Flear
If you’re leasing a car, you’re required by law to have
liability coverage
even though you don’t own your vehicle. And your finance company may require additional coverages like comprehensive and collision insurance before you drive off the dealership lot.These coverages can be costly. That’s why comparison shopping with
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What insurance coverage do you need for a leased car?
State requirements
Only two out of all 50 states don’t require car insurance. So unless you’re a resident of New Hampshire or Virginia, you’re required to carry some level of
liability insurance
to meet the minimum car insurance required in your state
. Two of the most common forms of liability insurance include:- Bodily injury liability: covers the at-fault driver’s bodily injury costs, including medical bills, lost wages, and other injury-related expenditures stemming from an accident
- Property damage liability: covers the costs of repairing vehicles and property that’s damaged in an accident that the at-fault driver caused
Another type of insurance you may need or choose to purchase in your state is
personal injury protection (PIP)
. Each state will determine the coverage amount you’ll need, if any. PIP will help cover the costs of accident-related injuries that you or your passengers sustain that liability alone will not cover.Oftentimes, minimum liability limits won’t cover all of the damages resulting from an accident, such as auto repairs and medical expenses. To mitigate this risk, you can purchase higher liability insurance amounts—in addition to meeting whatever car insurance requirements the lessor has in place.
Aside from liability coverage, your state may require drivers who lease cars to hold
underinsured and/or uninsured motorist coverage
. With this coverage, you’ll have help paying for expenses arising after an accident with an uninsured at-fault driver. Or, if the driver has insufficient coverage, it can also help pay for damages and legal fees so you don’t have to foot the entire bill out of pocket.Lessor requirements
When you lease a car, your leasing company, or lessor, will likely require you to buy auto insurance to cover any damages to your leased vehicle. That’s because a liability insurance policy alone only pays for damages to other parties if you cause an accident. And uninsured and underinsured motorist coverage may or may not be coverage requirements in your state.
Lessors, typically require additional coverage, known as full-coverage car insurance. This coverage is broken down into two common types: 1)
collision coverage
and 2) comprehensive coverage
. - Collision coverage will help cover a collision involving your car, regardless of whether you were actively driving or at fault. It will cover any collision where your vehicle hits another vehicle or stationary object. Naturally, this insurance will also cover rollovers and hit and runs.
- Comprehensive insurance covers events outside of your control, not including collisions with another object or vehicle—think vandalism, theft, natural disasters, or animal contact. These collisions are also called “act of God” incidents, and any damages resulting from such are filed under and paid for by comprehensive insurance.
Since there’s no way to determine the likelihood of getting into certain types of accidents or the type of damage you or your vehicle will sustain, your leasing agent will likely require bundling multiple coverage types to cast the widest safety net.
Do you need gap insurance for a leased car?
Gap insurance
for a leased car may be required by your lessor—it may even be included in your lease agreement. Gap insurance is handy if you total your leased car because it covers the difference between your new vehicle's actual cash value (ACV) and what you owe on the lease. In simple terms: gap insurance covers whatever amount you have left to pay minus your deductible.
As you can imagine, this type of coverage is used primarily for a new car that undergoes heavy depreciation the moment it’s driven off the lot. Usually, gap coverage is offered either through the lessor as monthly payments or an upfront fee. But if you choose to purchase it through your insurance provider, the cost is often integrated into your insurance rate.
Generally, gap insurance won’t help you as much if you’re leasing a used car. But even if you’re not leasing a new vehicle, it never hurts to ask what your options are.
Is leased car insurance expensive?
Whether you purchase a car outright, take out an auto loan, or lease a car, you’ll need to buy car insurance. That said, leased car insurance may require additional coverage compared to a financed car or a paid-off vehicle.
As previously discussed, your lender or lessor may require more expensive policies or a higher amount of minimum coverage. The cost of state-mandated insurance also varies based on where you live and your driving record.
Another consideration that can lead to more expensive premiums is your elected deductible. Higher deductibles usually afford lower monthly premiums. Thus, if your lessor caps your deductible at a specific amount in order to protect themself, your insurance premium could end up being much higher as a lessee than as an owner.
How to find cheap car insurance coverage for a leased vehicle
Buying a new car insurance policy can be seriously stressful stuff. Before you make the down payment on your leased vehicle, ensure you’re getting the best deal on the protection you need.
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Do you need insurance for a leased car?
Yes, you need insurance for a leased car. By law, you must also meet the state minimum liability insurance requirements. Many car lenders or lessors will also require full-coverage insurance, including comprehensive and collision coverage, as part of the lease terms.
What’s the difference between car insurance and lease insurance?
The largest difference between car insurance and lease insurance tends to be how much coverage you’re required to carry. If you lease a vehicle, you’re at the whim of whatever coverage (and the costs that come with it) your finance company requires.
